Further to the changes to LAFHA announced by the government in November 2011, the government announced yesterday that it would delay the start date of these changes from 1 July 2012 to 1 October 2012.
This means that current LAFHA arrangements can continue until 1 October 2012 and this will give employers and employees additional time to prepare for the changes. The main reasons for this extension are in response to submissions received during the government’s consultation process and to implement some minor technical changes to the claiming of food and drink expenses.
The legislation for the changes to LAFHA has been introduced into parliament and is expected to be passed in August.
From 1 October 2012, the following changes will apply:
- Living Away From Home Allowances will be treated as taxable income rather than as an exempt fringe benefit;
- Employees receiving the allowance can claim income tax deductions in their individual tax returns for reasonable accommodation and food expenses, provided they meet the criteria and have the required substantiation;
- The LAFHA expenses can be reimbursed by the employer rather than the employer paying a taxable allowance. The reimbursement will be a fringe benefit that is reduced to NIL provided the employee meets the criteria and holds the necessary substantiation;
- Employees will be required to own or rent another home in Australia that is their usual place of residence, while they are living away from it, and this home cannot be rented out in their absence from it;
- The tax concessions will be limited to a 12 month period for any employee in a particular work location;
Transitional rules apply for permanent residents for arrangements entered into before 8 May 2012.
If you have any questions or would like to talk to a tax advisor to discuss how this will apply to your situation, please don’t hesitate to contact us.
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